After a decent performance in some markets in December, the national housing market got slapped around in January as resales slipped by 5.3%. Resales include only sales of existing homes, not new construction.
According to the National Association of Realtors which tracks these numbers many buyers apparently decided to wait out the inauguration of Barack Obama to the US presidency before buying. Obama promised and has since delivered an important incentive to new home buyers in the form of an $8000 tax credit. This credit applies only to first-time home buyers, however.
Waiting on the Stimulus Package
Lawrence Yun, chief economist for the National Association of Realtors said there was understandable hesitation by some home buyers. “Given so much stimulus package discussion in January, some would-be buyers simply sat out for clarity and certainty on the nature of housing stimulus,” he said. “The housing market will soon get a lift from very favorable buying conditions – not only from improved affordability, but also from the stimulus of an $8,000 first-time home buyer tax credit, and higher conforming loan limits that will allow more people to tap into 50-year low mortgage rates.”
And it is those lower rates which will likely cause many buyers to finally jump into the market this Spring.
Inflation Will Soon Arrive & Mortgage Rates Will Climb
Given that inflation is on its way, we’re not likely to see mortgage rates this low again for many years. Inflation is inevitable as the federal government prints more money to pay for expanded government services. That debt will have to be paid off eventually, but in the meantime the government will need to make interest payments. Most economists agree that the current low mortgage rates are not sustainable.
According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to a record low at 5.05 percent in January from 5.29 percent in December; the rate was 5.76 percent in January 2008.
Bad News For Homeowners Is Good News For Home Buyers
Also in January the average price of an American home declined to $170,000 the lowest level in many years. For some homeowners, all of the gains they’ve realized over the past decade have been wiped out, leaving many more recent buyers under water with their mortgages. A mortgage is under water when the homeowner owes more on their home loan than what the home is worth.
Of course, this news is tough for homeowners, but it does present an opportunity for buyers. Though it is impossible to time the bottom of the market, the person who jumps in now and plans to hold onto their home for many years should find it to their advantage.
Source: National Association of Realtors
Helpful article? Leave us a quick comment below.
And please give this article a rating and/or share it within your social networks.